Yesterday we looked at funds that offer access to private equity including Fundrise Innovation (VCX) which is a closed end fund that just started trading last week and had rocketed to a 1900% premium to its NAV as of yesterday's close. A different story today.
So now it's only trading at an 1100% premium to its NAV? This stuff is fun to look at and learn about but seriously, keep your money in your pocket.
Eric Balchunas from Bloomberg posted this chart.
His point was that if you think the S&P 500 is concentrated, that's nothing compared to most other country benchmarks. In my time writing at thestreet.com, I wrote about many of the iShares country funds and would mention the sector composition in this context. From 20 years ago, it would have been easy to wind up with huge overweight in something like financials. Today, if you have a core of some S&P 500 fund and add iShares Taiwan (EWT) 68% tech and iShares Netherlands (EWN) 32% tech, you'd have less diversification than you might think.
Someone wanting to go big on semiconductors and foreign could instead use ProShares S&P 500 ex-Tech (SPXT) for domestic and then EWT and EWN for their tech exposure for example. That's really just an example of how to look through to the sector level in these funds, not something I'm doing.
Let's game this out, below. The 30% in EWT gives the overall about 23% in tech.
Austria EWO is a source of financials, Switzerland (EWL) is healthcare and industrials and Peru (EPU) is materials. I used XLY to add the US and consumer discretionary and KXI is global staples.
Copilot with the assist.
If you give this method more thought, I might suggest reducing the financial sector exposure a little bit. That sector tends to be big in many country benchmark indexes. The backtest for this versus All Country ex US, All Country including US and the S&P 500 was fascinating.
Calling it fascinating might be a little optimistic but the result is pretty much identical to All Country World (ACWI), that's the one that includes the US. I pulled the allocation out of the air pretty much. I had some understanding of what some of the country funds are heavy in with regard to sector composition. I just used AI to do the sector math. AI could obviously help dial in the sector weightings better and then help with diversifying risk. I tried a little bit with different types of economies like commodity based and service based and so on but I would not take today's theory as optimal.
Quick personal note, I am thrill that baseball has started. Most afternoons during the season I am on my laptop with a game on, very much a joyful thing for me. This guy has what might be the greatest nickname in the history of sports. His nickname is The Password.
The information, analysis and opinions expressed herein reflect our judgment and opinions as of the date of writing and are subject to change at any time without notice. They are not intended to constitute legal, tax, securities or investment advice or a recommended course of action in any given situation.
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